Farmer-Owned Insurance

Product offers yield protection

Less than two years old and owned by 10 Midwest farmers, Illinois-based Ag Armour rolled out its first crop insurance product, HarvestMAX.

With corn prices dropping below cost of production for many, this product is particularly applicable in 2014, says John Read, Ag Armour CEO. HarvestMAX is designed for producers with more than 800 acres who pay lower premiums.

Unlike federal crop insurance, HarvestMAX can insure up to 95% of a farmer’s 10-year trended average production history (APH) with price protection for corn and soybeans. The December 2014 corn contract and November 2014 bean contract, based on the prior December’s average, determine the price guarantee.

The maximum for federal crop insurance is 85%, with most Midwest farmers choosing 80%, Read says. "Production costs are $750 to $850 per acre for corn but with federal crop insurance this year, farmers only have coverage for $650 to $775," Read explains. "In the event of sub-trend yields, our product can help them break even."

The 2014 market price with HarvestMAX is $4.50 per bushel for corn and $12.76 per bushel for beans. The product has a 10 bu. to 25 bu. deductible, and farmers can insure as little as 30% of the base price to as much as 120%, Read says, noting that farmers could guarantee as much as $4.60.

"Farmers can insure 25 to 50 bu. per acre," he says, but on a total farm basis. In this way, it’s similar to enterprise units with federal crop insurance. A farmer can choose to insure from 75 acres up to the total acres planted in a crop. It protects yield, not revenue, Read adds.

Premiums are highly variable and depend not only on coverage levels and market price elections, but also management practices. Farmers are scored on everything from soil type, nitrogen application, use of GPS, crop rotation, irrigation and other production and risk variables.

A farm with optimal management practices might pay a lower rate compared to farms managed on the low end of the spectrum, Read says. Rates could vary from as little as $12 to $15 per acre up to $40 to $50.

HarvestMAX is offered in nine states: Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, Ohio, South Dakota and Wisconsin. Farmers have until March 20 to sign up for the program, but it might not be available until then in all states where it’s sold.